Litigation

American Needle opinion highlights joint venture risks

By Lori Bauman

Last week's unanimous decision in American Needle, Inc. v. NFL has been hailed as the first win for an antitrust plaintiff in years in the US Supreme Court -- following victories for defendants in cases including most recently Leegin, Twombly, and Weyerhaeuser. It's also a reminder of the dangers present when competitors enter into a joint venture.

At issue in American Needle is National Football League Properties (NFLP), which the 32 NFL teams formed to develop, license and market the teams' names and logos.  A former licensee of NFLP claimed that the agreement among the teams to form NFLP was a violation of Sherman Act Section 1, which prohibits contracts and conspiracies in restraint of trade.  The NFL and its teams argued in response that they are, for purposes of antitrust law, a single entity that cannot conspire with itself.  

The Supreme Court disagreed with the NFL.  The relevant inquiry is whether the alleged joint action is among "separate economic actors pursuing separate economic interests such that the agreement deprives the marketplace of independent centers of decisionmaking, and therefore of diversity of entrepreneurial interests."  The court held that NFLP is the result of concerted action by independent actors and thus is not protected from Section 1 scrutiny.  "Directly relevant to this case, the teams compete in the market for intellectual property.  To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks. . . . Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that deprive the marketplace of independent centers of decisionmaking and therefore of actual or potential competition."

Joint ventures often enhance value to consumers by bringing novel products to market.  But to avoid antitrust problems, joint venturers that are also competitors must ensure that they are not pooling resources simply to avoid competition in the marketplace

Full post as published by Northwest Business Litigation Blog on May 30, 2010 (boomark / email).